Have you tried sky diving? It is really exciting, but on your first try it would really be frightening. Same is true when managing your own retirement investments. During preparation of your self directed 401k you must also spend time educating yourself on the rules related to your IRA. By doing this, you would be able to gain enough knowledge to control your own plan. It holds true, provided that the fiduciary isn’t self dealing, which is extremely illegal or prohibited. Fiduciaries may act only on their own interest in a way that might harm you or your IRA.
Then, why does a great portion of the population think that they are better off managing their own plan after establishing a self directed 401k? Perhaps this is due to lack of understanding of these participants. And once a 401k is legally established, the person can have control of his/her retirement holding. Mainly speaking, it would imply:
• Investing your money without time restrictions. Let’s say when a participant of a self directed wanted to have a timely investment once they already find a custodian or trustee that will process their request for ten days. One may be mad or will argue if the participant had full control of their funds, the timely restriction in this example, will be cut in ten days.
• Carrying out the transactions. Owners can be capable of doing the same transactions made by custodians eliminating different fees. Logically - does a self directed 401k participant need to pay some fees each time they have a transaction to be implemented if they could do it for themselves? Thus, the plan holder may save incurring hundreds of dollars in yearly transactions.
• Maintenance fees are to be paid by the participant. One example is the monthly service fee to be paid to the bank. Why do we need to pay for additional fees, specifically maintenance fees to our custodian or trustee?
• A participant also pays for account balance fees. A large number of trustees or custodians charge fees dependent on the account balance of the participant. Does this make sense to you? It is like the brokers, the more the transactions or holdings in your IRA account, absolutely they will make more.
• Money will be your future. Most people want to control or take responsibility for their hard earned assets in their accounts. So, if we are capable of managing our IRA, why spend for the additional services of a custodian.
These are some factors that affect the self directed 401k participants.
• Security of their assets.
• To ensure that regulations set by the Department of Labor and IRS are fulfilled or obeyed by the self directed plan.
• Boost and increase their assets.
• The potential to completely manage your assets, so don’t think twice to self direct it.
Therefore, once a self directed 401k participant obtains assistance in investing the money for timely transactions, as fiduciaries in their own plan, they could control all the transactions, the fees and most specially their accounts . Be educated and remember that self directing your holdings is the key to success.